The Financial Buzz Word - Bancassurance

Abstract

Banks are engaged in their core business of accepting deposits and lending loans, their activities are regulated and restricted by RBI. Bank's core activities are also not so profitable; hence, their bottom-line is shrinking. Thus, they have to think of other activities and sources of income. Bancassurance is the buzzword in the current financial service market, where the banks are forming joint ventures with insurance companies, to encash the wide customer database and the everlasting trust. The insurance companies get sufficient business and premiums through the collaboration, enhancing their presence and market share. On the other hand, the banks are earning handsome commission income. Today, banks are having more than 50% other income in their balance sheet, by selling insurance, mutual funds, pension plans and unit-linked products. Bancassurance has gained so much momentum that almost all the banks have joined hands with one or the other life and non-life insurance company. Some banks have even adopted organic growth mode by starting their own insurance business like SBI life. Insurance is a service industry; it is there to serve the changing needs of the customers. Insurance is a matter of solicitation and needs a push strategy by the seller to convince the customers. The bank customers are not fully aware of their insurance cover requirements. To make both ends meet and for the mutual co-existence, bancassurance is the answer, to provide tailor-made and customized products for the mutual benefits of customers, insurer and the bank. It has also created a huge wave of recruitment not only for management professionals but also at every level.